yrf 


TilE 


PACIFIC  RAILROADS, 


THE    RELATIONS 


F^XISTING  BETWEEN  THEM 


AND   THE 


GOVERNMENT  OF  the  UiNITED  STATES. 


NEW  YORK, 

1879. 


fc . A 


THE 


PACIFIC  RAILEOADS, 


AND 


THE    RELATIONS 


EXISTING  BETWEEN  THEM 


AND  THE 


GOYERNMENToF  THE  UNITED  STATES. 


1-UrNru   Vm- i,iUr.,  ?rfr,  >  e-»2  - 13^ 


NEW  YORK, 
1879. 


M 


3  West  21st  Street, 
New  York,  27  Feb.,  1879. 


Bjexry  V.  Poor,  Esq.  : 

Dear  Sir  : 


I  understand  that  you  have  prepared  a  paper 
concerning  the  legal  relations  of  the  Union  Pacific  Railroad  Compa- 
ny to  the  Government  under  the  decisions  of  the  Supreme  Court  of 
the  United  States.  Not  doubting  from  your  connection  with  the 
enterprise  in  its  incipient  stages,  and  from  the  attention  you  have 
given  to  the  subject  to  the  present  time,  that  your  paper  will  be 
calculated  to  correct  some  prevailing  misapprehensions,  I  trust  it 
will  find  its  way  to  the  public. 

I  have  had  no  stock  in  the  Company  since  my 
resignation  as  President  ten  years  ago  ;  nor  have  I  been  concerned 
in  any  way  with  its  transactions,  or  any  outside  movements  relating 
to  it.  But  I  regard  it  as  one  of  the  great  enterprises  of  the  age, 
the  rapid  accomplishment  of  which  caused  more  astonishment  in 
other  countries  than  anything  we  have  achieved,  and  as  a  larger  con- 
tributor to  our  growth  and  prosperity  than  any  one  other  cause.  I 
do  not  doubt  that  it  will  continue  to  be  so,  whatever  combinations 
may  be  formed  by  speculators  in  Wall  Street  to  enhance  or  depress 
the  market  value  of  its  stock. 

I  did  not,  as  you  know,  approve  or  assent  to 
the  Credit  Mobilier  contracts,  which  were  mac».^  while  I  was  in 
Europe ;  but  this  is  a  matter  entirely  apart  from  the  legal  relations 
of  the  Company  to  the  Government.  These  should  be  understood 
by  the  whole  Community — not  only  for  ihe  purpose  of  removing  mis- 
conception, by  which  the  public  mind  is  unjustly  prejudiced,  but  to 
prevent  legislative  bodies,  under  the  influence  of  the  prevalent  and 
not  unr^^ural  jealousy  of  large  corporations,  from  being  misled  and 
hurried  into  ill-considered  and  unauthorized  enactments. 


Yours  truly, 


JOHN  A.  DIX. 


The  Union  Pacific  and  the  Centeal  Pacific  Raiit 

EOADS   and   their   EeLATIONS   TO   THE 

.  /  A«*  ->  United  States. 

»•  ■  ■  >K.i  '•  'I '    i.^-  ■-  '  •  ^• 

New  York,  6  Marcli,  1879. 
Hon.  John  A.  Dix, 

Dear  Sir: 

Recent  decisions  of  the  Supreme  Court  of  tlie 
United  States,  the  Tribunal  of  final  resort,  have  at  last  established 
and  defined  beyond  controversy  the  respective  rights  of  the  two  Pacific 
Eailroad  Companies  and  those  of  the  Government,  growing  out  of  the 
act  for  their  incorporation  j  the  acts  additional  thereto  ',  the  issue 
of  bonds  by  the  Government  in  aid  of,  and  the  contracts  for,  the 
construction  of  the  Eoads  of  the  two  Companies. 

Act  incorporating  the  pacific  companies,  and    the   govern- 
ment SUBSIDY. 

TheActof  Congress  of  July  1,  1862,  incorporating  the  Union  Pacific 
ri  Company,  tlie  Central  Pacific  deriving  its  charter  not  from  the  Unit- 
'^  ed  States,  but  from  the  State  of  California,  provided  for  the  issue  of 
■V.   bonds  by  the  Government  in  aid  of  the  Roads,  equaling  $16,000,  $32,- 


4 

3 


^ 


000,  and  $48,000  per  mile,  according  to  the  character  of  the  country 
traversed,  the  intention  being  to  apportion  the  bonds  in  ratio  to  cost. 
The  bonds  were  simply  obligations  of  the  Government,  to  wliich  the 
Railroad  Companies  were  in  no  way  parties.  The  bonds  were  six 
per  cents,  payable  in  thirty  years ;  the  interest  payable  semi-annually. 
To  secure  the  payment  of  both  principal  and  interest,  a  first  mort- 
gage was  created,  by  statute,  upon  the  respective  Roads.  For  the 
payment  of  the  principal  and  interest  thus  secured  it  was  provid 
ed  by  the  act  of  incorporation  (sec.  6)  that : 

'^  All  compensation  for  services  rendered  for  the  Government  shall 
ho  applied  to  the  payment  of  said  bonds  and  interest  until  the 
whole  amount  is  fully  paid  j  *  *  *  *  and  after  said  road  is 
completed,  until  said  bonds  and  interest  are  paid,  at  least  five  per 
centum  of  the  net  earnings  of  the  said  road  shall  also  be  annually 
applied  to  the  payment  thereof." 

The  companies  thus  chartered  were  duly  organized,  but  so  hazard- 
ous was  the  enterprise  regarded  that  no  parties  possessing  adequate 
capital  could  be  found  to  embark  in  it.  The  feeling  in  reference  to 
it  was  well  expressed  by  Hon.  Justin  S.  Morrill,  at  that  time  one  of 
the  leading  and  best  informed  members  of  the  House.  In  a  speech 
in  reference  to  the  project,  pending  t!ie  passage  of  the  Bill,  he  said : 


"I  am  not  to  be  deceived  by  any  promises  that  this  is  to  bo  built 
and  run  by  any  other  parties  than  the  United  States.  Every  dollar 
that  it  takes  to  construct  the  road  is  to  be  contributed  by  the 
United  States.  There  is  not  a  capitalist  that  will  invest  a  dollar  in 
it  if  he  is  to  be  responsible,  for  any  considerable  distance.  »  *  * 
If  it  could  be  constructed  it  could  not  be  kept  in  operation  except 
at  the  expense  of  the  government.  If  this  road  were  built  to-day, 
therefore,  and  given  to  the  United  States,  the  United  States  are  not 
in  a  condition  to  accept  it,  even  as  a  gift,  if  compelled  to  run  it; 
nor  will  they  be  till  the  population  has  so  far  increased  as  to  give 
the  road  some  freight  and  some  local  business.  As  a  commercial 
and  economical  question  such  road  is  utterly  defenseless."  (See 
Con.  Globe,  2d  Session  37  Congress,  Page  1,708.) 

Mr.  Morrill,  in  his  speech,  only  too  faithfully  represented  the  con- 
viction which  prevailed  among  conservative  minds,  and  capital  is 
always  conservative,  in  reference  to  the  project.  No  sooner  was  it 
seen  that  the  provision  made  was  wholly  inadequate  than  Congress, 
more  than  ever  impressed  with  its  necessity,  passed,  on  the  2d  of 
July,  1864,  an  act,  in  addition  to  that  of  1862,  providing  that: 

•^  Only  one-half  of  the  compensation  for  services  rendered  the 
Government  by  the  said  companies  shall  be  required  and  applied  to 
the  payment  of  the  bonds  issued  by  the  Government  in.  aid  of  the 
construction  of  said  roads.  '  And  further,  section  10  of  said  act,  '^that 
the  section  five  (of  the  act  of  1862)  be  co  modified  and  amended  that 
the  Union  Paciiic  and  Central  Pacific  Eailroad  Companies  *  *  * 
may  issue  their  first  mortgage  bonds  on  their  respective  railroads 
and  telegraph  lines  to  an  amount  not  exceeding  tlie  bonds  cf  the 
United  States,  and  of  even  tenor,  date,  time  of  maturity,  rate  and 
character  of  interest,  with  the  bonds  authorized  to  be  paid  to  said 
Eailroad  Companies  respectively.  And  the  lien  of  the  United  States 
bonds  shall  be  suborainate  to  that  of  tlie  bonds  of  either  of  said 
companies  hereby  authorized  to  be  issued  on  their  respective  roads, 
property,  and  equipment.'' 

The  amended  bill  not  only  practically  doubled  the  amount  of  the 
Government  subsidy,  but  relieved  the  Companies  of  the  burden  of 
Government  transportation  by  allowing  them  to  be  paid  one-half  the 
charges.  This  provision,  it  was  assumed,  would  avoid  all  loss. 
With  their  means  so  increased  they  at  once  entered  upon  the  work 
of  construction,  and  opened  the  whole  line  within  a  period  of  seven 
years  from  the  date  of  the  act  of  incorporation,  although  they  were 
allowed  by  it  fifteen  years  therefor. 

The  roads  of  the  two  Companies  were  no  sooner  opened  than  ques- 
tions naturally  arose  between  them  and  the  Government  involving 
the  obligation  of  the  Companies  to  repay  to  the  Government  a 
Eum  equal  to  the  interest  on  its  bonds  as  the  same  falls  due  ;  and  the 
right  of  the  Government  to  withhold,  on  account  of  such  inter- 
est, all  payment  for  transportation  services  rendered  it;  the  sum 
upon  which  the  five  per  cent,  of  net  earnings  should  be  cast; 
and  the  right  of  the  Government  to    inquire  into  the   contracts 


and  other  matters  growing  out  of  the  construction  of  the  road  of  the 
Union  Pacific  Company. 

First  ^— the  obligation  of  the  companies  to  pat  the  interest 

ACCRUING  on  the  GOVERNMENT  SUBSIDY,  AND  THE  RIGHT  OF 
THE  GOVERNMENT  TO  WITHHOLD  ALL  TRANSPORTATION  CHARGES 
ON  ITS  ACCOUNT. 

The  first  of  these  questions  was  settled,  or  was  supposed  to  be  set- 
tled, by  an  Act  (Section  9)  of  Congress,  of  March  3d;  1871,  which 
provided  that : 

'*  The  Secretary  of  the  Treasury  is  hereby  directed  to  pay  over,  in 
money,  to  the  Pacific  R;dlroad  Companies  mentioned  in  said  Act,  and 
performing  services  for  the  United  States,  one-half  of  the  compensa- 
tion, at  the  rate  provided  by  law,  for  said  services  heretofore  or 
hereafter  rendered." 

Payment  of  one-lialf  of  the  charges  on  account  of  Government 
transportation  continued  to  be  made  under  the  provision  of  this  Act, 
until  January  1,  1873.  On  the  3d  of  March  of  that  year,  Congress 
passed  an  Act  which,  among  other  things,  provided  (Section  2)  that: 

''  The  Secretary  of  the  Treasury  is  directed  to  withhold  all  pay- 
ments to  any  railroad  company  audits  assigns  on  account  of  freights 
or  transportation  over  their  respective  roads,  of  any  kind,  to  the 
nmountof  payments  made  by  the  United  States  for  interest  upon  bonds 
of  the  United  States  issued  to  such  company,  and  which  shall  not  have 
been  reimbursed,  together  with  the  five  per  cent,  of  net  earnings 
due  and  unapplied,  as  provided  by  law ;  and  any  such  company  may 
bring  a  suit  in  the  Court  of  Claims  to  recover  the  price  of  such  freight 
and  transportation;  and  in  such  suit  the  right  of  such  company  to 
recover  the  same  upon  the  law  and  the  facts  of  the  case  shall  be  de- 
termined j  and  also  the  rights  of  the  United  States  upon  the  merits  of 
all  the  points  presented  by  it  in  answer  thereto  by  them  ;  and  either 
party  to  such  suit  may  appeal  to  the  Supreme  Court ;  and  both 
said  courts  shall  give  sach  cause  or  causes  i)recedence  of  all  other 
business." 

Under  the  provision  of  this  act,  the  Union  Pacific  Railroad  Compa- 
ny brought  an  action  in  the  Court  of  Claims  to  recover  of  Govern- 
ment one-half  of  the  transportation  charges  on  its  account  from  Janu- 
ary 1,  1873,  to  March  ],  1874.  The  defense  was  that  as  a  very 
large  sum  had  been  paid  by  the  Government,  on-  account  of 
interest  on  its  bonds  issued  to  that  road,  it  might  properly 
offset  such  payments  against  the  claim  set  up  against  it. 
The  Court  of  Claims  held  such  payments  to  be  no  defense,  and 
gave  judgment  to  the  Company  for  the  sum  of  $512,632.50,  and 
dismissed  the  counter  claim  of  the  Government.  An  appeal  was  then 
taken  by  the  Government  to  the  Supreme  Court  of  the  United  States, 
wi.ich  sustained  the  decision  of  the  court  below.  In  its  decision, 
made  October  term,  1875  (Justice  Davis  rendering  the  opinion),  the 
Court  said : 


''  The  proposition  for  the  Government  to  retain  the  amount  due  the 
Company  for  services  rendered,  and  apply  it  toward  tiie  general 
indebtedness  of  the  Company  to  the  Government,  cannot  be  con- 
strued into  a  requirement  that  the  company  khallpay  the  interest  from 
time  to  time  and  the  principal  when  due.  It  was  in  the  discre- 
tion of  Congress  to  make  this  requirement,  and  then,  as  collateral  to 
it,  provide  a  special  fund  or  fun<is  out  of  which  the  principal  obli- 
gation could  be  discharged.  This  Congress  did  not  choose  lo  do,  but 
rested  satisfied  with  the  entire  property  of  the  company  as  secudty 
for  the  ultimate  payment  of  the  principal  and  interest  of  the  bonds 
delivered  to  it.        »»*****♦•* 

There  is  enougli  in  the  scheme  of  the  act,  and  in  the  purposes  con- 
templated by  it,  to  show  that  Congress  never  intended  to  impose  on  the 
corporation  the  obligation  to  pay  current  interest.  The  act  was  passed 
in  the  midst  of  war,  as  has  been  stated,  when  the  means  for  national 
defense  were  deemed  inadequate  to  the  wants  of  the  country,  and 
the  public  mind  was  alive  to  the  necessity  of  uniting  by  iron  bands 
the  destiny  of  the  Pacific  States  with  those  of  the  Atlantic.  Con- 
fessedly, the  undertaking  was  outside  of  the  ability  of  private  capital 
to  accomplish,  and  only  by  tlie  helping  hand  of  Congress  could  the 
problem,  difficult  of  solution  under  the  most  favorable  circumstances, 
be  worked  out.  Local  business,  as  a  source  of  profit,  could  not  be 
expected  while  the  road  was  in  course  of  construction,  on  account  of 
the  character  of  the  country  it  traversed;  and  whether  when  com- 
pleted, as  an  investment,  it  would  prove  valuable,  was  a  question  for 
time  to  determine.  Bat  vast  as  the  work  was,  limited  as  were  the 
private  resources  to  build  it,  the  growing  wants  of  the  country,  as 
well  as  the  existing  and  future  military  necessities  of  the  Govern- 
ment, demanded  that  it  be  completed.  Under  the  stimulus  of  these 
considerations.  Congress  acted.  It  did  uot  act  for  the  benefit  of 
private  persons,  nor  in  their  interest,  but  for  an  object  deemed  essen- 
tial to  tiie  security  of  the  country,  aa  well  2.^  to  tiie  prosperity  of  the 
country." 

By  this  decision  the  two  questions  first  raised— that  of  the  obliga- 
tion of  the  Companies  to  repay  to  the  Government  the  interest  on 
its  bonds  as  it  accrued ;  and  of  the  right  of  the  latter  to  retain 
for  such  payment  the  whole  of  the  transportation  charges  on  its  ac- 
count—were decided  wholly  in  favor  of  the  Companies.  The  accru- 
ing interest,  it  was  decided,  was  a  debt  not  due  till  the  bonds  were 
due,  except  so  much  of  it  as  could  be  met  by  the  application  thereto 
of  one-half  the  transportation  charges  on  Government  account,  and 
of  five  i)er  cent,  of  the  net  earnings  of  the  Companies. 

Sec:ND: THE    FIVE  PER  CENT.  NET  EARNINGS — HOW   TO  BE  DETER- 
MINED. 

Government  still  refusing  to  pay  over  to  the  Union  Pacific  Com- 
pany one-half  of  the  charges  on  account  of  transportation,  as  pro- 
vided by  the  act  of  1873,  and  in  accordance  with  the  decision  of  the 
Supreme  Court  in  1875,  the  Company,  in  1S76,  brought  another 
suit  in  the  Court  of  Claims  at  Washington,  for  one-half  of  its 
charges  for  187.5,  and  for  arrearages  of  1874.     To  this  sidt  the  Gov- 


erameiit  put  in  a  counter-claim  for  five  per  cent,  of  the  net  earnings 
of  the  Company,  under  the  provision  of  the  6th  Section  of  the  act 
of  18G2,  which  provided  that,  '^  After  the  said  road  is  completed, 
until  said  bonds  (issued  to  the  Company)  and  interest  are 
paid,  at  least  five  per  cent,  of  the  net  earnings  of  said  road 
shall  also  be  annually  applied  to  the  payment  thereof."  The 
United  States,  in  its  counter-claim,  alleged  that  the  road  was  com- 
pleted November  6,  1869.  The  Company  claimed  the  legal  dats  of 
opening  to  have  been  October  1,  1874.  The  Court  of  Claims  decided 
that  the  road  was  opened  November  6,  1869 ;  that  up  to  November 
6, 1874,  the  net  earnings  had  amounted  to  $28,052,045 ;  five  per  cent, 
upon  which  equaled  the  sum  of  $1,402,602 ;  while  the  sum  due  the 
Company  for  the  time  covered  by  its  suit,  chiefly  for  1875,  equaled 
$593,627.  making  a  balance  of  $803,975,  in  favor  of  the  Government. 
From  this  decision  the  Company  appealed.  That  of  the  Supreme 
Court,  rendered  at  the  October  term,  1878,  but  only  recently 
made  public,  sustained  the  position  of  the  Government,  that  tlie 
road  was  completed  November  6,  1369;  and  that  net  earnings  must 
be  calculated  from  that  period.  The  chief  point  of  interest,  however, 
was  the  rule  by  which  tliese  were  to  be  ascertained.  In  reference  to 
this  point,  the  Court  (Justice  Bradley  rendering  the  decision),  after 
disposing  of  the  question  of  the  date  at  which  the  road  was  opened, 
said:— 

"  The  question  next  arising  is,  what  are  the  net  earnings  of  five 
per  cent,  for  which  the  Company  became  liable  to  account,  and  in 
what  manner  are  they  payable  ? 

*•  In  the  first  place  they  are  the  '  net  earnings  of  the  road,'  that  is, 
the  net  earnings  cf  the  road  as  a  railroad,  inchiding  the  telegraph. 
They  have  nothiu'^-  to  do  with  the  income  or  profits  of  the  Company 
as  a  holder  of  public  lands.  The  proceeds  of  this  source  of  income 
are  no  part  of  the  earnings  of  the  road.  These  earnings,  however, 
must  be  regarded  as  embracing  all  the  earnings  and  income  derived 
by  the  Comi)any  from  the  railroad  proper,  and  all  the  appendages 
and  appurtenances  thereof;  including  its  ferry  and  bridge  at  Omaha, 
its  cars,  and  all  its  property  and  apparatus  legitimately  connected 
with  its  railroad."  *  *  *  *  *  * 

J'  Having  considered  the  question  of  receipts,  or  earnings,  the  next 
thing  in  order  is  the  expenditures  which  are  properly  chargeable 
against  the  gross  earnings,  in  order  to  arrive  at  the  ^^  net  earnings," 
a3  this  expression  is  to  be  understood  within  the  meaning  of  the 
act.  As  a  general  proposition  net  earnings  are  the  excess  of  the 
gross  carLings  over  the  expenditures  defrayed  in  producing  them, 
a^ide  from,  and  exclusive  of,  the  expenditure  of  capital  laid  out  in 
constructing  and  equipping  the  works  themselves.  It  may  often  be 
difficult  to  craw  a  precise  line  between  expenditures  for  construc- 
tion and  the  ordinary  expenses  incident  to  operating  and  maintain- 
ing the  road  and  works  of  a  railroad  company.  Theoretically,  the 
expenses  chargeable  to  earnings  include  the  general  expenses  of 
keeping  up  the  organization  of  the  company,  and  all  expenses 
incurred  in  operating  the   works  and  keeping  them  in  good  con- 


8 

dition  and  repair,  whilst  expenses  chargeable  to  capital  include 
those  ^hich  are  incurred  in  the  original  construction  of  the  works, 
and  in  the  subsequent  enlargement  and  improvement  thereof. 
With  regard  to  the  last  mentioned  class  of  expenditures,  however, 
namely  those  which  are  incurred  in  enlarging  and  improving  the 
works,  a  difference  of  practice  preva^'ls  among  railroad  companies. 
Some  charges  to  construction  include  every  item  of  exi)ense,  and 
every  part  and  portion  of  every  item  which  goes  to  make  the  road, 
and  any  of  its  appurtenances  or  equipments,  better  than  they  were 
before;  whilst  others  charge  to  ordinary  expense  account,  and 
against  earnings,  whatever  is  taken  for  those  purposes  from  the  earn- 
ings, and  is  not  raised  upon  bonds  or  issues  of  stock.  The  latter 
method  is  deemed  the  most  conseivative  and  beneficial  for  the  com- 
pany, and  operates  as  a  restraint  against  injudicious  dividends  and 
the  accumulation  of  a  heavy  indebtedness.  ^  *  *  But  for  making 
all  ordinary  improvements,  as  well  as  repairs,  it  is  better  for  the 
stockholders,  and  all  those  who  are  interested  in  the  prosperity  of 
the  enterprise,  that  a  portion  of  the  earnings  should  be  employed. 
We  think  that  the  true  interest  of  the  Government,  in  this  case,  is 
the  same  as  that  of  the  stockholders,  and  will  be  subserved  by  en- 
couraging a  liberal  application  of  the  earnings  to  the  improvement  of 
the  ivorks.  It  is  better  for  the  ultimate  security  of  the  Government 
in  reference  to  the  payment  of  its  loan,  as  well  as  for  the  service 
which  it  may  require  in  the  transportation  of  its  property  and  mails, 
that  a  hundred  dollars  should  be  spent  in  improving  tlie  works,  than 
that  it  shoidd  receive  five  dollars  towards  the  payment  of  its  sub- 
sidy. If  the  five  per  cent,  of  net  earnings,  demandable  from  the 
Company,  amounted  to  a  new  indebtedness,  not  due  before,  like  a  rent 
accruing  upon  a  lease,  a  more  rigid  rule  mightbo  insisted  on.  But  it  is 
not  so;  the  amount  of  the  indebtedness  is  fixed  and  unchangeable. 
The  amount  ofthe  five  per  cent,  anditsreceipt  at  one  time  or  another, 
is  simply  a  question  of  earlier  or  later  payment  of  a  debt  already  fixed 
in  amount.  If  the  employment  of  any  earnings  of  the  road  in  mak- 
ing improvements  lessens  the  amount  of  net  earnings,  the  Govern- 
ment loses  nothing  thereby.  The  only  result  is,  that  a  less  amount  is 
presently  paid  on  its  debt,  whilst  the  general  security  for  the  whole 
debt  is  largely  increased." 

As  the  decision  of  the  Court  of  Claims  was  overruled  in  various 
particulars,  some  points  having  been  decided  by  the  Supreme  Court 
in  favor  of  the  Government,  and  some  in  favor  of  the  Company,  the  - 
case  was  sent  back  with  an  order  that  its  judgment  be  made  respon- 
sive to  the  decisions  of  the  Court  above.  This  order  will  involve  a 
full  audit  of  the  accounts  of  the  Company  in  order  to  determine 
w^hat  proportion  of  its  apparent  net  earnings,  not  absorbed  by 
tbe  payment  of  interest  or  dividends,  has  been  applied  to  the  im- 
provement of  their  property.  It  is  sufficient  to  state  here  that  the 
^amount  annually  withheld  by  the  Government,  being  one-half  of  the 
charges  for  transportation  on  its  account,  has  considerably  exceeded 
.tlie  amount  of  five  per  cent,  of  their  net  earnings ;  so  that  during 
the  whole  controversy  which  has  now  extended  through  nearly  ten 
years,  the  Government,  not  the  Railroad  Companies,  has  been  and 
Btill  is  the  party  in  default 


Third  :  -  the  credit  jiobilier  suit. 

The  act  of  1873  which  authorized  the  Kailroad  Company  to  bring 
a  suit  against  the  United  States  for  the  recovery  of  one-half  of  the 
charges  withheld  from  it  on  account  of  government  transportation 
also  directed  (section  four)  that: 

*'  The  Attorney  General  cause  a  suit  in  equity  to  be  instituted 
in  the  name  of  the  United  States  against  the  Union  Pacific 
Kailroad  Company,  and  against  all  persons  who  may,  in  their  own 
names  or  through  any  agents,  have  subscribed  for  or  received  capi- 
tal stock  in  said  road,  w'hich  stock  has  not  been  paid  for  in  full  in 
money,  or  who  may  have  received,  as  dividends  or  otherwise,  por- 
tions of  the  capital  stock  of  said  road,  or  the  proceeds  or  avails 
thsreof,  or  other  property  of  said  road,'unlawfully  or  contrary  to 
equity,  or  who  may  have  received  as  profits  or  proceeds  of  contracts 
for  construction  or  equipment  of  said  road,  or  other  contracts  there- 
with, moneys  or  other  property  which  ought,  in  equity,  to  belong  to 
said  railroad  corporation,  or  who  may,  under  preteuse  of  having 
complied  with  the  acts  to  which  this  is  an  addition,  have  wrongfully 
and  unlawfully  received  from  the  United  States  bonds,  moneys  or 
lands  which  ought,  in  equity,  to  be  accounted  for  and  paid  to  said 
Railroad  Company  or  to  the  United  States,  and  ti  compel  payment 
for  said  stock,  and  the  collection  and  payment  of  sach  moneys,  and 
the  restoration  of  such  property,  or  its  value,  either  to  said  Railroad 
Corporation  or  to  the  United  States,  whichever  shall  in  equity  be 
^eld  entitled  thereto."  ,-» r  «    '^-  - 

In  pursuance  of  this  act  a  suit  was  brought  in  the  Circuit  Court  of 
the  United  States  for  the  District  of  Connecticut,  against  the  Union 
Pacific  Railroad  Company,  and  all  parties  in  privity  with  it,  in  order 
to  compel  an  account,  and  the  surrender  to  the  Government,  or  to  the 
Company,  for  the  benefit  of  the  Government,  of  the  moneys  improperly 
received  or  secured,  no  matter  how  or  by  whom,  growing  out  of  the 
construction  of  the  road.  The  chief  object  of  the  suit  was  to  reach 
"  The  Credit  Mobilier,"  a  company  organized  under  the  laws  of  the 
State  of  Pennsylvania,  and  which  was  made  use  of  to  avoid  a  per- 
sonal liability.  Capitalists  were  willing  to  put  up  their  money  and 
run  the  risk  of  its  loss,  but  they  were  not  willing  to  destroy  the 
credit  necessary  for  carrying  forward  their  own  business  operations, 
nor  run  the  risk  of  the  total  loss  of  their  fortunes  by  becoming  gen- 
eral partners  in  a  work  admitted  on  all  hands  to  be  hazardous  in  the 
extreme.  Each  one  must  judge  of  the  propriety  of  resorting  to  such 
intermediary  by  inquiring  how  he  would  act  were  he  similarly 
placed.  The  public  would  not  subscribe  a  do^.lar  to  the  stock  of  the 
Company  as  an  investment.  The  means  for  construction,  in  addition 
to  those  provided  by  Government,  or  which  could  be  raised  on  bonds, 
had  to  be  supplied  by  a  very  few  capitalists,  upon  whom  the  whole 
hazard  of  the  enterprise  was  thrown,  and  who  were  really,  if  not 
nominally,  parties  to  the  contract  for  construction.     Their  profits 


10 

were  not  increased  a  dollar  hy  a  resort  to  the  intermediary.  Those 
of  the  parties  who  took  contracts  for  construction  or  nuiteriul  were 
not,  in  conseqnence,  decreased  or  diminished  a  Kin;,Me  dollar.  The 
result  proved  that  there  was  no  necessity  whatever  for  such  resort,  as 
every  claim  was  met  Avithout  loss  or  embarrassment  on  eitlier  side. 

Such  in  its  length  and  breadth  was  the  Credit  Mohilier,  whicli  at 
one  time  made  sucli  a  stir  in  the  land.  It  was  resorted  to  for  no  im- 
proper purpose,  nor  was  it  ever  i)ut  to  an  imi)roper  one.  Congress, 
however,  believed  or  affected  to  believe,  that  a  great  offense  of  some 
kind  had  been  committed.  To  the  bill  wliicli  was  to  investigate  and 
punish  it,  the  defendants,  who  stood  in  ahnost  everj^  possible  relation 
to  the  Railroad  Company  and  to  the  Grovernment,  demuiTcd— denied 
that,  even  admitting  all  the  allegations,  there  was  any  cause  of  ac- 
tion against  them.  The  Circuit  Court  sustained  the  demurrer.  An  ap- 
])eal  was  then  taken  to  the  Supreme  Court  at  Washington.  Its  decision 
sustaining  that  of  the  court  below  was  rendered  at  the  October  tenn, 
1878.     In  course  of  it,  Justice  Miller,  delivering  the  opinion,  said  : 

''The  Government  sustains  two  distinct  relations  to  the  Eailroad 
Company,  and  it  is  important  in  considering  her  rights  under  this  sta- 
tute to  keep  them  separate.  Tiie  company  is  organized  under  an 
act  of  Congress.  It  owes  its  corporate  existence  to  that  act,  and  the 
Government  has  all  the  rights  which  belong  to  any  other  Govern- 
ment as  a  sovereign  and  legislative  power  over  tliis  creation  oft  :at 
power.  Tliat  this  power  should  not  be  too  much  crippled  by  the 
doctrine  that  a  charter  is  a  contract,  the  eighteenth  section  declares 
that  Congress  may,  at  any  time,  havbuj  due  rctjard  for  the  rit/hts  of 
the  companicfi  named  therein,  add  to,  alter,  amend  or  repeal  tie  act. 
The  power  of  Congress,  therefore,  in  its  sovereign  and  legislative 
capacity  over  this  corporation  is  very  great. 

''  The  government,  liowever,  holds  another  very  important  rela- 
tion to  the  comx)any,  namely,  the  relation  of  contract.  It  has  loaned 
to  the  company  twenty-seven  millions  of  dollars.  It  has  granted  to 
it,  on  certain  terms,  many  millions  of  acres  of  land.  The  govern- 
ment is  paying  all  the  time  the  semi-annual  interert  on  its  own 
bonds  which  it  loaned  to  the  company.  The  company  is  bound,  by 
contract,  to  pay  the  bonds,  principal  and  interest,  at  their  maturity. 
The  Government,  by  the  contract,  has  a  lien  on  the  road  and  its  ap- 
purtenances to  secure  thisiwyment.  The  company  is  also  bound,  by 
the  contract,  to  perform  for  the  Government  all  that  may  be  required 
of  it,  of  transiKirtation  and  telegraphing,  and  to  keep  itsroad  always 
in  order  and  readiness  to  do  this.  There  may  be  other  contract  ob- 
ligations of  the  company  to  the  Government  not  here  mentioned, 
but  these  are  all  tiat  are  important  to  our  inquiry.  The  Govern- 
ment lias  delivered  its  bonds  to  the  company.  The  con]pan\'  has 
built  the  road,  owns  it,  and  operates  it.  Is  there  anjthinii  growing 
out  of  this  contract,  alleged  in  the  bill,  for  which  the  United  States 
is  entitled  to  relief? 

''One  of  the  allegations  of  the  bill  is,  that  there  is  due  to  the 
United  States  and  unpaid,  on  account  of  interest  on  the  bonds,  the 
sum  of  six  million  one  hundred  and  ninety-eight  thousand  and  seven 
hundred  dollars,  and  that  the  bal  mce  of  interest  for  which  the  com- 
pany is  liable  is  rapidly  accumulating.     The  bill  in  ibis  case  was 


11 

filed  in  May,  1873,  and  this  Court  decided  at  its  October  Term,  1875, 
in  a  suit  between  the  same  parties,  that  the  company  was  not  bound 
to  pay  this  interest  until  the  maturity  of  the  bonds,*  except  so  far  as 
the  act  made  two  special  provisions  on  that  subject.  One  of  them 
was  that  half  the  compensation  for  transportation,  performed  for  the 
United  States  should,  as  provided  by  the  subsequent  amended  char- 
ter of  1864,  be  withheld  by  the  Government  for  that  purpose. 
Another  was  a  j)rovision  that  after  the  road  should  be  completed,  five 
per  cent,  of  the  net  earnings  of  the  road  should  be  applied  annually 
to  extinguish  the  debt  of  the  United  States." 
************* 

*^  There  is  therefore  no  ground  for  relief  on  account  of  money  due 
by  defendant  to  the  plaintiff." 

**********  *  ;;s 

^'  The  Government  made  its  contract  and  bargained  for  its  se- 
curity. It  had  a  first  lien  on  the  road  by  the  original  act  of  incor- 
poration, wliich  would  have  made  its  loan  safe  in  any  event.  But 
in  its  anxiety  to  secure  the  construction  of  the  road,  an  end  more 
important  to  tbe  Government  than  to  any  one  else,  and  still  more 
important  to  the  people  whom  it  represented,  it  postponed  this  lien 
t)  another  mortgage,  that  the  means  might  be  raised  to  complete  it. 
The  Government  has  the  second  lien,  however,  audit  has  the  riglit 
to  appropriate  one-half  of  the  price  it  pays  for  the  use  of  the  road — 
a  very  large  sum — annually,  and  five  per  cent,  of  the  net  earnings  of 
the  road,  which  may  become  larger,  to  the  extinction  of  this  debt. 
It  is  not  wholly  unreasonable  to  suggest  that  the  amount  which  the 
company  may  be  compelled  to  pay  annually,  under  these  two  pro- 
visions, will  be  sufficient  as  a  sinking  fuLd  to  pay  the  entire  debt, 
principal  and  interest,  before  it  falls  due. 

*'It  is  difficult  to  see  any  right  which  the  Government  has,  as  a 
creditor,  to  interfere  between  the  corporation  and  those  with  whom 
it  deals.  It  has  been  careful  to  look  out  for  itself  in  making  the  con- 
tract, and  it  has  the  right  which  that  contract  gives.  What  more 
can  it  ask  1  It  is  true  that  there  is  an  allegation  of  insolvency.  But 
in  what  that  insolvency  consists  is  not  clearly  shown.  It  has  a  float- 
ing debt.  But  what  railroad  company  has  not  ?  It  is  said  it  does 
not  pay  the  interest  on  its  debt  to  the  United  States.  We  have 
shown,  that  it  owes  the  United  States  no  money  that  is  due.  There 
is  no  allegation  that  it  does  not  pay  the  interest  on  all  its  own  funded 
debt.  The  allegation,  as  it  is,  would  be  wholly  insufficient  to  plafce 
the  corporation  in  bankruptcy,  even  if  that  was  notforbidden  by  the 
actunder  which  this  bill  is  drawn.  The  facts  stated  are  utterhj  in- 
sufficient to  support  a  creditor's  hill  by  the  XJnited  States.  That 
requires  a  judgment  at  law,  an  execution  issued,  and  a  return  of 
mdla  bona.  Here  there  is  no  judgment,  no  money  due,  and  no  suffi- 
cient allegation  of  insolvency. 

''Weare  unable,  therefore,  to  see  any  relief  which  the  United  States 
would  be  entitled  to  in  a  court  of  equity,  under  this  bill,  on  account 
of  its  contract  relations  with  the  defendant. 

'^  In  its  sovereign  or  legislative  relation  to  this  corporation,  the 
United  States  has  powers,  the  extent  of  which  it  is  unnecessary  to 
define  in  this  case.  The  two  sections  of  the  act,  under  one  of  which 
this  suit  was  instituted,  are  exercises  of  this  power.  They  affect  the 
interest  of  the  corporation  in  important  particulars.  In  addition  to 
this,  Congress  might  have  directed  the  Attorney- General,  by  this 
bill,  as  a  part  of  this  proceeding,  or  as  an  independent  one,  to  ask 
the  Court  to  declare  the  franchises  of  the  Company  forfeited.    It 


12 

mifrhthavc  ordered  a  bill  to  inquire  if  the  Company  wa8  insolvent, 
and  if  so,  to  wind  uj)  its  alfairs  an<l  distribute  its  assets.  Jn  short, 
there  are  many  modes  in  which  the  Lej^asiature  could  have  called 
into  operation  the  judicial  powers  known  to  the  law.  But  it  has  not 
done  so,  and  that  is  the  constantly  recurring  answer  to  this  bilV^ 

The  effect  of  the  decision  last  given  was  little  more  than  to  affirm 
and  sustain  that  of  1875,  which  declared  that  the  interest  accruing 
on  the  Government  bonds  was  not  a  debt  for  which  the  Companies 
were  immediately  to  provide,  and  that  the  Government  must  pay 
over  one-half  of  the  transportation  charges  on  its  account.  The 
Government  had  all  the  security  it  intended  to  exact — a  second  lien 
on  a  railroad  worth  more  than  three  timt^s  the  amount  of  its  loan. 
It  was  not  a  matter  of  the  least  interest  or  importance  to  it,  under 
what  kind  of  contracts  the  roads  were  built.  They  were  built,  and 
Government  had  its  security,  and  must  wait  for  the  payment  of  its 
advances,  principal  and  interest,  till  they  fall  due.  The  clause  in 
the  act  authorizing  a  suit  in  its  behalf,  was  intended  to  be  a  grand 
scoop-net  to  bring  before  the  courts,  and  punish,  all  offenders..  Yet 
the  ingenuity  of  Congress  could  not  draft  an  act,  nor  the  skill  of  the 
ablest  counsel  frame  a  case,  which  the  Supreme  Court  would  accept 
as  impugning  the  integrity  and  good  faith  of  the  Company. 

Fourth: — the   Tiiueman  sinkikg-fukd  bill. 

The  preceding  decisions  are  an  authoritative  interpretation,  by  the 
highest  tribunal  in  the  land,  of  the  act  incorporating  the  Pacitic  Rail- 
roads, and  of  the  acts  amendatory  thereof.  The  Supreme  Court  of 
the  United  States  is  not  only  the  proper  arbiter  in  all  such  matters, 
but  it  was,  up  to  a  certain  stage,  the  recognized  and  selected  arbiter 
by  Government  as  well  as  by  the  Railroad  Companies.  The  rela- 
tions of  the  two,  growing  out  of  the  act  of  the  incorporation,  were 
substantially  settled  by  the  decision  of  1875  j  yet,  in  the  face  of  this 
decision,  and  pending  the  action  brought  by  itself  for  the  purpose  of 
overhauling  the  Union  l*acific  Railroad,  as  well  as  of  the  action 
brought  by  the  Railroad  Company  to  determine  the  question  of  net 
earnings.  Congress,  by  the  famous '' Thurman  Bill,"  passed  May  8, 
1878,  deliberately  undertook  to  override  the  decision  of  the  Supreme 
Court,  and  to  seize  and  withhold  a  much  larger  sum  than  the  whole 
of  the  charges  for  Government  transportation  and  the  five  per  cent,  of 
net  earnings,  under  the  pretense  of  establishing  a  sinking  fund  out 
of  the  earnings  of  the  Companies,  for  the  purpose  of  retiring  their 
bonds  at  their  maturity.     That  bill  (section  4)  provided  that : 

"  There  shall  be  carried  to  the  credit  of  the  said  (sinking)  fund 
(created  by  this  act )  on  the  first  day  of  February  in  each  year,  the 
one-half   of  the    compensation   for    services  hereinbefore  named, 


13 

rendered  for  tlie  Grovernment  by  the  said  Central  Pacific  Eailroad 
Company,  not  applied  in  liquidation  of  interest ;  and,  in  addition 
thereto,  the  said  Company  shall,  on  said  day  in  each  year,  pay  into 
the  Treasury,  to  the  credit  of  said  sinking  fund,  the  sum  of  $1,200,- 
000,  or  so  much  thereof  as  shall  be  necessary  to  make  the  live  per 
centum  of  the  net  earnings  of  its  said  road  payable  to  the  United 
States,  under  said  act  of  eighteen  hundred  and  sixty-two,  and  the 
\^;hole  sum  earned  by  ifc  as  compensation  for  services  rendered  for 
the  United  States,  together  with  the  sum  by  this  section  required  to 
be  paid,  amounting  in  the  aggregate  to  twenty-five  per  centum  of 
the  whole  net  earnings  of  the  said  Eailroad  Company,  ascertained 
and  defined  as  hereinbefore  provided,  for  the  year  ending  on  the 
thirty -first  day  of  December  next  preceding." 

The  preceding  section  required  from  the  Union  Pacific  Railroad 
Company  the  sum  of  $800,000  annually,  in  addition  to  one-half  of 
the  earnings  on  Government  account ',  or  a  sum  which,  added  to 
such  half,  would  equal  25  per  cent,  of  the  net  earnings  of  the  Com- 
pany. The  amount  required  annaally  by  the  Thurman  Bill  from 
each  Company  is  about  twice  as  large  as  that  which  each  would  be 
required  to  pay  by  the  terms  of  their  Charter. 

The  decisions  of  the  Supreme  Court  of  the  United  States,  that  no 
moneys  are  due  from  the  Pacific  Eailroad  Companies  to  the  Govern- 
ment on  account  of  the  advances  made  by  it,  and  that  the  only 
amounts  it  can  claim  in  future  are  the  one-half  of  charges  for  trans- 
portation on  its  account,  and  five  per  cent,  of  the  net  earnings  of  the 
Companies,  and  the  action  of  Congress  attempting  to  compel  the 
payment  of  an  annual  sum  nearly  twice  greater  than  that  required 
by  law,  present  the  whole  question  now  in  controversy.  There  is 
no  pretense  that  Government  does  not  hold  ample  security  for  every 
dollar  it  has  advanced  with  all  the  interest  which  may  accrue.  With 
such  security  should  not  Government  be  held  as  much  as  an  indi- 
vidual to  the  observance  of  good  faith  in  the  contracts  into  which  it 
has  entered  ?  Can  it  act  otherwise  ;  or  rather,  are  not  the  rights  of 
the  Companies  sucli  as  cannot  be  overridden  by  any  act  of  Congress 
of  the  nature  of  the  Thurman  Bill  1  Is  it  not  certain  that  Congress 
possesses  no  such  power  as  it  presumed  to  exercise  by  virtue  of  this 
Bill  ?  In  the  construction  of  contracts  to  which  it  is  a  party  is  not  the 
Supreme  Court  the  sole  authoritative  tribunal  ?  When  Government 
itself  has  resorted  to  said  tribunal  in  vindication  of  its  rights  under 
contracts  to  which  it  is  a  party,  can  it,  when  the  decision  is  against 
it,  take  the  law  into  its  own  hands  ?  In  the  presence  of  such  a 
question,  the  rightful  ownershij)  of  a  few  hundred  thousand,  or  a 
few  million  of  dollars  sinks  into  utter  insignificance.  It  is  a  ques- 
tion that  lies  at  the  very  root  of  society.  If  the  action  of  Congress  is 
to  stand,  we  are  no  longer  a  free  people,  but  the  victims  of  blind  pas- 
sion or  caprice  far  more  to  be  dreaded  than  a  relentless  despotism. 


14 


Fifth  : — the  right  of  congress  to  annul  the  charters  of  the 
pacific  railroad  companies. 

The  questions  so  far  passed  upon  by  the  Supreme  Court  re- 
lated to  contracts  into  which  the  Government  and  the  Kailroad 
Companies  had  entered.  The  question  of  annulling  or  repealing 
their  charters  was  not  raised.  It  might  have  been  raised ;  but 
when  raised,  the  decision  in  it,  the  Court  declared  in  its  judgment 
in  the  Credit  Mobilier  Case,  rested  with  itself,  not  with  the  Govern- 
ment. There  are  rights  to  be  adj udicated  upon  in  proceedings  for  such 
repeal,  for  the  determining  of  which  Congress  has  no  more  compen- 
tency  or  power  than  it  has  for  determining  rights  arising  under  con- 
tracts to  which  the  Government  is  a  party.  Congress  is  not  a  Court 
of  Law  with  power  to  summon  and  examine  witnesses,  and,  with  the 
assistance  of  juries^  to  render  judgments  in  damages,  and  issue  the 
proper  processes  for  their  execution.  Wherever  rights  are  reserved 
in  a  charter  granted  by  it,  Congress  must  make  use  of  some  other 
tribunal  than  itself  for  determining  them,  as  a  condition  precedent 
and  absolutely  necessary  to  give  any  validity  to  any  declaration  of 
repeal  of  its  own.  No  principle,  or  rule  of  procedure,  is  better  recog- 
nized than  this  under  all  governments  that  are  not  despotisms. 
When  Congress  has  created  a  cori)oration,  and  when  in  the  exercise  of 
its  proper  functions  such  corporation  has  raised  on  its  securities,  and 
invested  in  its  works,  large  sums  of  money,  Congress  can  no  more 
reclaim  its  grants  without  cause,  than  it  can  seize  indiscriminately, 
and  without  an  equivalent,  the  property  of  any  citizen.  Ours  is  a 
Constitutional  Government  with  a  careful  and  jealous  limitation  of 
its  powers,  when  the  rights  of  the  people  are  concerned.  To  deter- 
mine rights  dependent  upon  a  charter,  Courts  of  Law  must  always 
be  resorted  to,  before  which  Government  and  the  corporations 
created  by  it  are  litigants  on  equal  terms.  All  are  alike  within  the 
domain  and  restraini:  of  law.  Should  Congress  without  any  adjudi- 
cation by  the  Courts  declare  the  Pacific  Railroad  Corporations  forfeit, 
and  proceed  to  take  possession  of  their  roads  or  property,  it  or  its 
agents  would  be  immediately  restrained  by  a  higher  law  in  the 
premises  than  its  own.  In  all  such  matters  the  Government  is 
a  party,  not  a  court.  To  be  party  and  judge,  would  be  to  make 
the  will  of  the  stronger  law; — in  other  words,  would  override  law 
in  its  relations  to  all  others.  This  is  pure  tyranny,  which,  however 
much  it  may  obtain  in  Congress,  has  fortunately  its  proper  corrective 
in  the  Supreme  Court  of  the  United  States,  to  which,  when  the  ques- 
tion of  right  comes  before  it,  the  Government  of  the  United  States, 
or  rather  its  servants,  are  just  as  amenable  as  the  humblest  citizen 
in  the  land. 


15 

Sixth  :— what  the  companies  hate  accomplished  for  the  gov- 
ernment AND  the  country. 
It  is  not  necessary  here  to  refer,  at  any  length,  to  the  wholly  nn- 
merited  obloquy  and  abuse  of  which,  for  several  years  past,  the  two 
companies  have  been  made  the  victims.     It  is  doubtful  whether  a 
more  striking  example  of  the  vicissitudes  of  public  opinion,  or  popu- 
lar caprice,  can  be  found  than  in  the  treatment  which  they  have  re- 
ceived.    The  proposition  for  the  construction  of  a  railroad  across 
the  continent,  at  the  very  moment  that  the  nation  was  in  the  throes 
of  civil  war,  the  event  of  which  seemed  wholly  uncertain,  was  re- 
garded as  a  forlorn  hope,  in  which,  as  you  and  I  well  know,  none 
but  the  adventurous  could  be  brought  to  engage.    Well  invested 
capital,  as  well  as  all  conservative  minds,  shrank  back  in  dismay 
from  all  solicitations  to  engage  in  the  work,  which  must  have  been  a 
disastrous  failure  but  for  the  fortunate  discovery,  then  not  made,  of 
coal  at  favorable  points  on  its  line.     The  companies  were  allowed 
fifteen  years  for  its  completion.    They  anticipated,  by  eight  years, 
the  allotted  time.     Its    completion    was    hailed  as   the    greatest 
achievement  of  the  kind,  as  it  was  at  the  time,  of  human  enterprise 
and  skill.   The  nation  rang  with  paeans  simg  in  praise  of  those  resolute 
and  competent  spirits  to  whom  it  owed  so  much.    The  road  travers- 
ing more  than  two   thousand  miles   of  unoccupied  territory,  and 
crossing  mountain  ranges  at  elevations  far  exceeding  the  loftiest 
summits  on  the  Atlantic  slope,  has  accomplished  far  more  than  was 
predicted  of  or  hoped  from  it.     It  has  filled  with  busy  and  prosper- 
ous   communities    a    desert    waste,  which    but  for  it  must  have 
still  remained  a  desert  waste.     lb   has    indissolubly  united,  as   it 
was  intended  to  unite,  the  two  slopes  of  the  continent,  and  made 
the  nation  a  geographical  and  commercial,  as  well  as  a  political  and 
social,  unit.     It  has  been  the  sole  condition  of  opening  and  develop- 
ing the   mineral   wealth,   now    the   wonder  of   the  world,  of   the 
interior    of    the    continent;    and    is    the    instrument    by    which, 
and    by     which     alone,    the     nation     can     resume     specie     pay- 
ments without  drawing  from  or  disturbing  the  reserves  of  the  old 
world.      In  order  to   reach  this   great  national  artery,  more  than 
ten  thousand  miles  of  railroad,  costing  more  than  $500,000,000,  have 
been  built,  which,  but  for  it,  would  not  have  been  built.     The  in- 
creased value  of  the  property  of  the  country,  due  to  its  construction, 
exceeds  five  times  its  cost.     The  direct  advantage  to  the  people,  re- 
sulting from  its  construction,  exceeds  five  times  the  amount  of  the 
public  subsidy.      They  could  far  better  lose  a  sum  equaling  many 
times  the  cost  of  the  line  than  be  without  it.      When  the  proposi- 
tion of  a  railroad  across  the  continent  was  first  seriously  proposed, 
the  Secretary  of  War,  in  response  to  a  call  of  the  House  of  Repre- 


16      ' 

sentatives  under  date  of  March  18,  1862  (see  Executive  Document 
80  of  that  year),  stated  that  the  annual  cost  of  transportation 
of  troops  and  munitions  of  war  between  the  Mississippi  River 
and  the  Pacific  Coast  and  intermediate  points  equalled  $5,809,- 
431.  The  cost  of  transporting  the  mails  between  the  same 
points  was  $1,500,000  annually,  making  a  total  expenditure  of  $7,- 
309,431  annually.  The  cost  to  Government  for  a  similar,  and  in  fact 
a  much  greater  service,  does  not,  in  the  sums  paid  to  the  railroads 
for  the  past  nine  years,  exceed  the  sum  of  $2,000,000  annually.  The 
saving  to  Government  in  the  matter  of  its  own  transportation  due 
to  tlieir  construction  has  exceeded  $5,000,000  annually,  or  a  total 
sum  of  $45,000,000.  Such  savings  are  among  the  least  advantages 
resulting  from  their  construction.  But  for  this  road  the  nation  would 
require  a  military  force  vastly  greater  than  that  now  maintained.  As 
an  instrument  for  opening  the  interior  of  the  continent,  adding  to 
its  wealtl),  and  in  stimulating  its  production  and  trade,  the  value  of 
the  Pacific  Railroads  is  beyond  computation. 

It  was  no  sooner  opened,  however,  than  the  services  of  the 
past  were  speedily  forgotten.  Those  who  had  accomplished  such  a, 
vast  and  beneficent  achievement,  were,  in  a  few  short  years,  trans- 
formed into  remorseless  Shylocks,  gorging  upon  the  life-blood  of  the 
nation,  deserving  the  severest  punishment  that  the  law  could  inflict. 
It  was  not  enough  that  all  legal  tribunals  open  to  the  Government  were 
resorted  to.  Congress  in  its  zeal  outdid  the  most  clamorous  patriot  on 
the  stump.  It  passed  an  act  to  seize  outright,  and  in  violation  of  all 
law,  one-quarter  of  all  the  net  earnings  of  the  two  companies,  to  be  ap- 
plied to  debt  which  will  hardly  be  payable  during  the  present  genera- 
tion. The  Companies  could  only  yield  to  the  storm,  till  their  rights 
could  be  vindicated  by  a  higher  power  than  that  of  Congress  itself. 
By  that  power,  which  cannot  be  impeached  for  its  competency,  its 
knowledge  of  the  law,  or  as  a  corrupt  receiver  of  bribes,  the  Com- 
panies have  been  fully  vindicated,  and  now  stand  before  the  world 
without  a  blemish,  or  an  insinuation  that  has  not  been  fully  refuted. 
At  the  end  of  their  long  struggle  for  the  maintenance  of  their 
rights,  they  are,  in  their  determined  resistance  to  lawless  oppression 
to  which  in  the  end  every  citizen  may  in  his  turn  be  exposed,  as 
much  entitled  to  the  gratitude  of  the  public  as  when  they  received 
it  in  such  full  measure,  for  the  great  work  which,  with  dauntless 
energy  and  resolution,  they  carried  to  a  speedy  conclusion  in  the 
face  of  obstacles  far  greater  than  those  which  ever  opposed  them- 
eelves  to  any  similar  enterprise. 

I  have  the  honor  to  be, 

Yery  respectfully, 

Henry  V.   Poor. 


iili 


'^ii-  "^i 


